Credit Guide

A lot has been written in the past few years about the importance of both credit reports and credit scores. The credit report is a listing of all significant financial transactions by a consumer and whether or not those transactions were completed on time and as agreed. The score is a distillation of everything contained on the credit report, boiled down to a three-digit number. That number is supposed to indicate to a creditor or a lender, at a glance, whether or not the consumer in question is worthy of another loan.

Card Consolidation Credit Debt Until recently, the three major credit bureaus, Experian, Trans Union and Equifax, all used different but similar systems to devise the credit score, which ranged from 300 at the low end to 850 at the high end. The different systems meant that a consumer checking his or her score with each of the credit bureaus would receive three different credit scores. This led to some confusion as to which score was the "correct" one. The bureaus have recently attempted to solve that problem by creating VantageScore, a unified scoring system that all three bureaus will use. This should result in a consumer receiving the same score no matter which bureau provides it.

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Credit Union But this hasn't entirely stopped the confusion over credit scoring. Unlike the old systems 300-850 range, the VantageScore uses a different scale that ranges from 501-990. In addition to the numeric score, the VantageScore system will also provide a letter grade, ranging from A-F, as follows:

If there is no credit limit reported, then it becomes difficult, if not impossible, to properly calculate the ratio — usually to the detriment of the consumer's credit score. Both Soler and the Federal Reserve Board researchers learned that when credit limits were not reported, most scoring systems "substitute the consumer's highest balance ever for the missing credit limit." This is because Equifax, Experian and Trans Union keep track of the highest balance in a separate field on the credit report.

Merchant Credit Guide Co 901-990 - A
801-900 - B
701-800 - C
601-700 - D
501-600 - F

Additionally credit scoring systems such as Fair Issac (FICO) did not treat authorized user accounts separately when computing the credit score, so the son or daughter would inherit, so to speak, the favorable credit history of the parent. The result could be that even kids with limited credit experience who were authorized users with good credit parents might now have a strong FICO score. Of course, the reverse was also true, and many authorized users could inherit the bad credit from the parent, lowering their score.

Apply Online For Credit Card Now the source of the confusion has changed. Many people have erroneously assumed that a score in the old system will be transferred to the new system. That means, to their way of thinking, that a top score in the high 700s or low 80s under the old system is now merely "average" under the new one. How, people are wondering, did a top score suddenly become mediocre?

A credit score is a number that reflects your credit worthiness at a given point in time. For most models, the higher the score, the better the risk.¹⁷ People with higher scores often can obtain mortgages, credit cards, loans, and insurance at more favorable rates. Conversely, the lower the score, the less favorable the terms will be in any offer that is made. The credit score is based on data in your credit report, which is why the bulk of this book is devoted to credit reports, and the system that creates them.

By Card Credit Debt Debt Guide The answer, of course, is that it didn't and that comparisons between the old system and the new one are like comparing apples with oranges. The new system is completely different and will use a new set of criteria to create the new score from the ground up. A score in the 800 range under the old system will almost certainly become a score in the 900 range under the new one. Consumers have no reason to be alarmed, and in time, the new system will be better and more easily understood than the old one. After all, nothing tells you that you have done well better than being told that you have received an "A".

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©Copyright 2006 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including End-Your-Debt.com, a site devoted to debt consolidation, credit counseling, payday loans and personal bankruptcy.

Active Credit Credit Guide

Credit Score Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including End-Your-Debt.com, a site devoted to debt consolidation, credit counseling, payday loans and personal bankruptcy and HomeEquityHelp.net, a site devoted to mortgages and home equity loans.

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